Fiscal plan draws flak, praise

By IBT Staff Reporter On 12/01/10 AT 8:00 PM

Senate Budget Committee Chairman Kent Conrad (D-ND) (L), and U.S. House Budget Committee Chairman Rep. John Spratt (D-SC) in Washington February 4, 2008. Both members of the Debt Commission, Conrad supports the commission's plan announced today, while Spratt is undecided. A vote on the plan is slated for Friday. Photo: REUTERS

Sen. Judd Gregg, R-NH, stated the obvious today regarding a plan to deal with the nation's long-term fiscal well-being. He said, There are no easy fixes here.

He may just as well have said that there are no easy ways to move forward even when you have a plan full of uneasy fixes.

The National Commission on Fiscal Responsibility and Reform today unveiled its plan for cutting the nation's $13.8 trillion debt down to manageable size and immediately triggered the kind of opposition and criticism commission co-chair Alan Simpson predicted.

Simpson, former Republican senator from Idaho, said critics from both sides of the political spectrum would rip the plan to shreds. He said the plan would be buried in an unmarked grave.

But this baby ain't going away, Simpson added at today's press briefing. When lawmakers are forced to deal with the national budget this spring, the commission's plan will rise from the crypt.

The commissioners themselves may have begun digging the plan's grave. Of the panel's 18 members, 14 must vote to approve the plan for it to go to Congress as a proposal. The commissioners will vote on Friday. Three commissioners - Rep. Jan Schakowsky, D-IL, Rep. Paul Ryan, R-WI and Rep. Jeb Hensarling, R-TX -- said today that they would vote against it.

Bowles has already said that if the supermajority of commissioners fails to approve the plan, it will still be a valuable document because Congress can use it to spur debate on the issue.

The era of deficit denial is over in Washington, Bowles said.

The commissioners opposing the plan agreed with Bowles that the deficit is a problem that must be dealt with. Hensarling said the most significant result of the commission's work was producing a plan, which lawmakers may now use to develop a better plan.

Schakowsky said the nation is on an unsustainable fiscal course, but she could not support the plan because it did not share the burden, as professed, but leans too heavily on the nation's more vulnerable populations.

To reduce our deficit and debt by asking Medicare recipients to pay higher fees is not sharing the sacrifice, she said.

Hensarling and Ryan objected to the plan's call for ending tax breaks.

The plan intends to reduce the national debt by $4 trillion by 2020, by cutting discretionary spending and eliminating tax breaks. It would eliminate earmarks, cut farm subsidies, freeze the defense budget and eliminate 200,000 federal jobs by attrition.

The plan would also gradually raise the Social Security retirement age to 68 by 2050 and 70 by 2075. The plans also proposes cuts to Medicare and Medicaid,

According to the plan, over $1.4 trillion of the savings would come from discretionary spending, over $700 billion from mandatory spending, over $700 billion from tax reforms, and over $600 billion from paying less interest on debt.

Under this proposal, in 2020, the budget deficit is projected to be to just $382 billion, or 1.6 percent of the projected 2020 GDP. By 2037, the budget would be balanced and then turned into surpluses in subsequent years.

The spending cuts would start gradually in 2012 in order to not disturb the fragile economic recovery, the commission said.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which group backs the plan as a mature way forward in dealing with the nation's fiscal problems, said that the plan will find supporters even if it doesn't get the 14 votes on Friday.

I think the plan is great and it will get support , MacGuineas said. It does a lot on every area, which unfortunately is necessary.

AFL-CIO President Richard Trumka issued a statement denouncing the plan.

No proposal on fiscal issues is serious that leaves the Bush tax cuts for the rich in place while raising taxes on the middle class and slashing Social Security and Medicare, Trumka said. All commission members should vote no on this misguided plan. All members of Congress should also oppose these job-killing policies if they are raised in future legislation or budgets.

Trumka said the plan reeks of hypocrisy.

The faux deficit hawks on the commission - and Senators who claim unemployment insurance must be paid for -- have no problem clamoring for more unpaid Bush tax cuts for millionaires, Trumka said.

Trumka said lawmakers should be focused on the jobs deficit.

Fifteen million people are out of work, and another eleven million have given up looking or are working part-time involuntarily, he said. We need to invest in jobs by rebuilding our crumbling infrastructure and green technologies and end tax breaks that send American jobs overseas.

John Irons, research and policy director for Economic Policy Institute, saidit is becoming increasingly clear that the Bowles-Simpson plan will not receive the required 14 votes to send the report to the President and Congress. The rejection of the proposal should not be seen as a failure to take deficit reduction seriously, but rather that the policy approach adopted by the co-chairs is flawed.

Irons said the plan fails to fully acknowledge the current economic crisis.

The plan calls for serious belt-tightening beginning in just 10 months, even though the nation's unemployment rate will still likely be between 9 and 10 percent, Irons said.

The plan includes no concrete, immediate action to create jobs or to spur economic growth in the near term, Irons said.